Board Gets Advice On Plans For State Retirement Savings Program

NEW BRITAIN — Of all retirees who receive Social Security, 26 percent are living on those checks alone. A state Retirement Security Board, made up of private sector employees and state and union officials, is trying to make sure that doesn't happen to Connecticut residents in the future.

But the board, which met Wednesday night at Central Connecticut State University, is restricted by legislation passed in the last session that says any public retirement plan has to cost the state nothing and has to guarantee a rate of return for each coming year.

Professors, financial advisers, political activists and interested citizens all weighed in during the meeting with their views of how the state could achieve the goal of a more comfortable retirement for everyone when 34 percent of workers have no retirement savings.

Co-Chairman Kevin Lembo, the state's comptroller, said all those who spoke agree "that there is a retirement security crisis. But there are many different thoughts on how a state could encourage savings or could create a plan."

Representatives of the Working Families party and the state employees' union urged the board to make the state retirement savings plan as much like a traditional pension as possible, while a speaker from a free-market advocacy group said the state should not take on such a mission.

Many of those who testified from the financial services industry told the panel that access to tax-advantaged savings is not the problem, but rather that people don't make the choice to save if it's not offered as a payroll deduction at work.

"There is no lack of access," said Aaron Friedman, a Connecticut resident who was speaking on behalf of the Securities Industries and Financial Markets Association. He said the main reason people don't save is because they need that money for expenses such as food, rent and health care.

"They simply can't afford that sort of luxury," he said.

He said that SIFMA is concerned that if the state begins its own retirement savings vehicle, employers will abandon their plans. Since the state would make no contribution to its plan and many employers' plans provide some match to employees' savings, some workers would be worse off in the state plan.

Mark Augustin, chief operating officer of Aspire Financial, asked the board to require that employers offer a payroll deduction IRA such as the one his company launched called EZ IRA. He said his product costs employers nothing to offer and requires no management of accounts. But that product cannot be auto-enrolled, a goal of the state system.

Tim Lane, a managing director of TIAA-CREF, was one of the few financial industry officials who supported the establishment of a state plan, though he agreed with others that access is not the primary issue. His company manages the state 529 college savings plan.

He asked the board members to ask themselves: "What will success look like?" He said they will have to answer some fundamental questions about balancing risk and return and how much freedom workers will have to cash out their lump sums before retirement.

Mark Ferris, a financial planner who was one of the few speakers who represented only himself, said the board has to consider the root cause of insufficient saving for retirement.

"It's not for a lack of plans. It's for a lack of money," Ferris said.

Ferris said he has told clients that when they don't put aside the 6 percent of their pay needed to get an employer's 3 percent match, it's like turning down a 3 percent raise.

Ferris became a financial planner after the corporation that used to employ him as an engineer pulled out of Connecticut. He said if the state had more skilled jobs that command competitive wages, "that would solve a lot of the problem."

The board will report back to the legislature in 2016 about whether a public plan under the guidelines of the legislation is feasible.